Central bank may let yuan fall to support export firms
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China's central bank may allow the yuan to fall against the dollar if necessary, a central bank advisor was quoted as saying by a Japanese newspaper Wednesday.
China shows no signs of a double-dip, "but now that there is flexibility in the yuan, the exchange rate of the currency will decline if it becomes necessary to support exports," Zhou Qiren, a member of the Monetary Policy Committee of the People's Bank of China (PBC), told Asahi Shimbun.
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The yuan's value against the dollar is approaching an appropriate level, and there is little room for further substantial appreciation, said Lu Zhengwei, a senior economist with Industrial Bank.
The yuan's central parity rate was set at 6.7802 against the dollar Wednesday, a rise of roughly 0.7 percent after the PBC announced the proceeding with the exchange rate regime reform one month ago.
The currency reform, initially launched in 2005, was suspended during the financial crisis. The yuan has risen 22 percent against the dollar as of Wednesday over the past five years.
The exchange rate has seen an obvious two-way fluctuation over the past month, with widening yuan fluctuation, but it has not fluctuated as much as before the crisis, Lu said.
Over the past month, the yuan's central parity rate against the dollar saw a high of 6.7718 and a low of 6.8275, with the fluctuation range reaching 0.8 percent.
The yuan is on the way to becoming a more flexible currency, Lu said.
"The yuan has already been quite flexible against other currencies such as the euro, pound sterling and yen. The next step for the yuan should be more flexibility against the dollar," Lu added.
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